No Cost-Free Climate Control

by Jonathan H. Adler
The EPA says its rules could deep-six new coal plants — but would have no economic impact.

On Friday, the Environmental Protection Agency proposed new regulations limiting carbon dioxide emissions from power plants. If finalized, this regulation will, in effect, bar the construction of new coal-fired power plants unless they use costly carbon-capture technology. It is the latest in a series of EPA regulations governing greenhouse gases that the Supreme Court triggered with its decision in Massachusetts v. EPA. Still more regulations are on the way.

The EPA’s proposed rule would require both natural-gas and coal-fired power plants to meet stringent new limits — limits that most new natural-gas plants can meet, but that are not (yet) met by any coal-fired plant in regular operation. Specifically, the regulation would limit CO2 emissions from power plants to between 1,100 and 1,000 pounds per megawatt-hour (lbs/MWh), depending on the size of the plant and method of emission monitoring. This is an easy standard for state-of-the-art gas plants to meet; coal, not so much. Right now, the average U.S. coal plant emits over 1,700 lbs CO2/MWh. The average natural-gas plant, on the other hand, emits around 850 lbs CO2/MWh.

In proposing the new rule, the EPA is trying to have its cake and eat it too, proclaiming that the rule represents an important step in the control of greenhouse-gas emissions while simultaneously promising that the rule will have no meaningful economic impact. Based on current economic trends, the EPA projects that most new power-plant capacity built in the next decade will be from natural gas or renewable fuels, rather than coal. In other words, by this logic, the rule is redundant. Yet if the rule does not impose any costs, it also will not reduce emissions much, either. As summarized in the EPA’s Regulatory Impact Analysis:

The EPA anticipates that the proposed EGU New Source GHG Standards will result in negligible CO2 emission changes, energy impacts, quantified benefits, costs, and economic impacts by 2022. Accordingly, the EPA also does not anticipate this rule will have any impacts on the price of electricity, employment or labor markets, or the US economy.

What then could be the benefit of the rule? According to the EPA, should market conditions change, the rule could prevent the construction of high-emitting coal plants. As a consequence, the EPA suggests, the rule will encourage investment in carbon-capture and sequestration technology that could enable coal-fired plants to comply with the rule. Of course, if the rule could prevent the construction of coal-fired plants, then it could have economic costs. The EPA cannot have it both ways.

Although the agency’s regulatory analysis predicts that the rule will have no meaningful environmental or economic effect, EPA Administrator Gina McCarthy proclaimed that the rule will “minimize carbon pollution by taking advantage of modern, cleaner energy technologies that power companies are already using to build the next generation of power plants.” Controls on greenhouse-gas emissions, McCarthy claims, will help protect the nation from the costs of climate change:

Without these steps we will continue to pay an ever-increasing price for climate impacts. In 2012 alone, the cost of weather disasters exceeded $110 billion in the United States, the second costliest year on record.

This is shameful stuff. The earth has been warming (until recently), and human activity shares part of the blame. Yet there is no evidence that global warming — human-induced or otherwise — has increased the costs of weather-related disasters. Contrary to the claims of Al Gore and other climate alarmists, neither hurricane frequency nor intensity has increased over the past century, despite the increase in atmospheric temperatures. As the University of Colorado’s Roger Pielke Jr. recently testified before Congress:

It is misleading, and just plain incorrect, to claim that disasters associated with hurricanes, tornadoes, floods, or droughts have increased on climate timescales either in the United States or globally. It is further incorrect to associate the increasing costs of disasters with the emission of greenhouse gases.

There’s also new scientific research suggesting that warming could actually reduce the threat of super storms on the Atlantic Coast, rather than increase it. There are good reasons to be concerned about anthropogenic global warming, but recent “weather disasters” are not among them.

If finalized, the EPA’s rule is likely to be challenged in court. At issue will be whether the new standards comply with the relevant statutory requirements, particularly as applied to coal plants. Under Section 111 of the Clean Air Act, the EPA is to set an emission limit “achievable through the application of the best system of emission reduction” that, accounting for the economic costs, “the Administrator determines has been adequately demonstrated.” This awkward statutory language about the “best” emissions-reduction system that is “adequately demonstrated” means that the EPA cannot set new emission standards based on the hypothetical performance of unproven technologies, as such technologies have not been “adequately demonstrated.” Therein lies a potential problem for the EPA. At present, the only way for coal-fired plants to meet the standard is by installing carbon-capture and sequestration (CCS) technology. Yet CCS technologies are new and largely unproven. The EPA notes that a handful of CCS facilities are under way, including one in Mississippi that has received substantial federal support, but these facilities are not yet in regular operation, and there is no evidence thus far that CCS is cost-effective. So the question for courts will be whether the EPA can point to CCS as an “adequately demonstrated” emission-control technology.

Whether or not this rule is finalized and survives court challenge, more greenhouse-gas (GHG) regulations are coming our way. Under the Supreme Court’s Massachusetts v. EPA decision, the EPA is effectively required to adopt GHG emission rules under the Clean Air Act. That this statute is poorly suited for GHG control is irrelevant. Unless the law is revised (or the Supreme Court reconsiders Mass. v. EPA), it will be the source of costly-though-ineffective carbon controls for years to come. Thus, those concerned about the EPA’s climate agenda need to focus on revising the Clean Air Act. This is a daunting task, particularly in the Senate. This is yet one more reason for conservatives to come up with alternative approaches to climate-change policy. Even those who don’t accept that climate change is serious problem should recognize that many policies are preferable to letting the EPA use the Clean Air Act to regulate GHGs.

— Contributing Editor Jonathan H. Adler is professor of law and director of the Center for Business Law & Regulation at the Case Western Reserve University School of Law. He participated in an amicus brief in Massachusetts v. EPA filed by the Cato Institute.

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